Shell PLC · LSE:SHEL
Shell — FY2004 Earnings Presentation
35 slides from Shell's earnings presentation, Feb 3, 2005
Slide 1: Q4 and Full Year Results 2004
Q4 and Full Year Results 2004 3 February 2005
Slide 2: Disclaimer statement
Disclaimer statement The following presentation/press release/speech contains forward-looking statements, that are subject to risk factors associated with the oil, gas, power, chemicals and renewables business. It is believed that the expectations reflected in these statements are reasonable, but ma
Slide 3: 2004 – making headway
2004 – making headway • Record earnings and cash generation 9 • Reserves review complete 9 • Delivery on structure and governance 9 • More upstream, profitable downstream 9 • More cash to shareholders 9
Slide 4: Delivering on our strategy
Delivering on our strategy 2004 % change • Record net income ($ bln) 18.5 +48 • Record cash from operations ($ bln) 25.6 +18 • Strong divestment proceeds ($ bln) 7.6 • LNG growth (mt) 10.2 +9 • Production in line (mboe) 3.8 -3 • Record downstream earnings ($ bln) 7.5 +154
Slide 5: More upstream, profitable downstream
More upstream, profitable downstream 2004 Capital Investment $14.9 bln 2004 divestment proceeds $7.6 bln $ bln (100%) $ bln 10 10 8 8 6 6 4 4 2 2 0 0 EP GP OP CH EP GP OP Other Shaping the portfolio to match the strategy
Slide 6: Investing in growth
Investing in growth PTT PTT polymer polymer Kashagan Oman Oman license license Sakhalin Sakhalin sales sales Libya Libya HoA HoA Kashagan plant plant FID extension extension agreements agreements FID Athabasca Athabasca resources resources Nanhai Nanhai Retail Retail JV JV Baja Baja Chemicals Chemic
Slide 7: Exploration and Production: robust results
Exploration and Production: robust results Production mln boe/d 4.2 • Earnings of $9.7bln, up 6% New • Record DACF of $16.4 bln Divestments 4.0 Volumes Other Field hurricanes decline PSC • 2004 production 3.8 mboe/d, at high end of range 3.8 • New fields on stream 3.6 3.4 2003 2004
Slide 8: Rigorous reserves review process
Rigorous reserves review process Asset Internal teams audit • Rigour in compliance teams Regional Ryder co-ordination • Succession of review steps Scott & challenge Gaffney Regional • Strengthened internal audit Cline Reserves & Assoc Committee • Use of external experts Global Reserves Committee Exe
Slide 9: Proved reserves restatement
Proved reserves restatement • End 2003 proved reserves reduced by 1.4 billion boe • Expected 2000-04 financial impact not material • Technical reporting factors primary cause • Reserves review completed • 2004 RRR some 45-55% (excluding year end pricing and divestments) • Target of 100% average RRR
Slide 10: Gas & Power: continued LNG growth
Gas & Power: continued LNG growth Shell equity LNG capacity mtpa 25 14% pa growth (2003-2008) • Earnings of $2.2 bln Prospects 20 • DACF of $1.2 bln, up 15% Sak 2 15 • LNG sales volume up 9% Sak 1 NLNG 6 OLNG3 10 NLNG 4/5 • New LNG projects on stream NWS4 MLNG3 5 • Continued strong LNG growth 0 2003
Slide 11: Oil Products: driving performance
Oil Products: driving performance Oil Products global adjusted unit CCS earnings per barrel* • CCS Earnings of $6.5 bln, 2.5 Shell Competitor range up 107% 2 • US earnings of $1.7 bln, up 345% • DACF of $8.6 bln, up 100% 1.5 • Improved operational performance 1 • Progress on differentiated fuels 0.5
Slide 12: Chemicals: strong operational earnings
Chemicals: strong operational earnings Utilisation rates • Earnings of $0.9 bln 90% • DACF of $1.9 bln, up 102% • Strong operational earnings 85% • Improved asset utilisation 80% • Favourable margins • Downstream integration 75% 2001 2002 2003 2004
Slide 13: Malcolm Brinded, Exploration & Production
Malcolm Brinded Executive Director Exploration & Production
Slide 14: Reserves review process
Reserves review process Asset Internal audit teams teams Regional Ryder Scott co-ordination & challenge Gaffney Cline Regional & Assoc Reserves Committee Global Reserves Committee Executive Committee Group Audit Committee Parent Company Boards
Slide 15: Year end 2003 proved reserves restatement
Year end 2003 proved reserves restatement bln boe 15 Excluding oil sands Including minority interests Financial impact: -1.4 • Preliminary figures 14 14.35 • 2000-2004 impact is expected to be 13 $700 mln 12.95 • Equivalent to around 1% of income 12 over the five year period • Small number of impair
Slide 16: Year end 2003 proved reserves restatement
Year end 2003 proved reserves restatement bln boe 15 Excluding oil sands Technical reasons for further restatement: Including minority interests 1. Recovery factors (decline curves) 14 14.35 -1.4 2. Definition of proved area 3. Availability of directly comparable fields (“analogues”) 13 12.95 4. Low
Slide 17: 2003 Restatement: Recovery Factors (Decline curves)
2003 Restatement: Recovery Factors (Decline curves) Historical data Currently producing well Actual historical production Actual historical production (example well) Simulator forecast Gas rate Gas rate Expected producible resources based on simulator Proved Reserves Extrapolation of based on early
Slide 18: 2003 Restatement: Recovery Factors (Decline curves)
2003 Restatement: Recovery Factors (Decline curves) Currently producing well Basis for proved developed reserves Actual historical production • Extrapolation of production history Simulator forecast • Decline Curve Analysis a common method Gas rate • Assumes no further activities Basis for expected
Slide 19: 2003 Restatement: major oil & gas field
2003 Restatement: major oil & gas field Conceptual map Three important factors impacting oil reserves: Lowest known Lateral Recovery factor hydrocarbons extent (Analogue) Expected 235 m 9 km 30% 9 km GAS OIL Proved 97 m 5.5 km 18% WATER • Proved reserves14% of expected producible resources 0 1 2 3 k
Slide 20: 2004 Reserves Replacement
2004 Reserves Replacement 2004 Reserves Replacement Ratio (RRR): • excluding year end pricing 45 - 55% • including year end pricing 30 - 40% • including year end pricing and divestments 15 - 25% • Continue to target 2004-2008 RRR average of 100% • 2005 RRR likely below 100%
Slide 21: 2004 Year end pricing: Peace River
2004 Year end pricing: Peace River Peace River Lloyd Blend - Edmonton 0 • 7 bln boe of bitumen in place Differential • Expected recovery 1+ bln boe -10 C$/bbl Peace River leases -20 31.12.2004 Bitumen -30 2000 2001 2002 2003 2004 2005 Current development areas Failed economic limit test for proved r
Slide 22: Ormen Lange Resources
Proved Reserves in Ormen Lange Conceptual view of Ormen Lange Shell proved reserves based on GAS ‘offset’ development wells only 4 Shell estimates: Gas in Ormen Lange Resources place (bln boe 100%) Aspired Recovery Expected Producible 0 5 10 15 20 25 km Proved Reserves (100%), estimate of Conceptual
Slide 23: Unlocking the resource base
Unlocking the resource base Hydrocarbon resources and development Includes oil sands Excludes Sakhalin minority interests As shown on 22 September 2004 60 Difficult scope Producible resources, bln boe e.g. further volumes in Sakhalin, Kazakhstan, Nigeria, oil sands, Asia Pacific gas Longer-term 40 s
Slide 24: Unlocking the resource base
Unlocking the resource base Hydrocarbon resources and development Building the resource base for the future Includes oil sands Excludes Sakhalin minority interests No change in overall resource base • Acreage renewal: 7 countries, 50,000 sqkm 60 Difficult scope Producible resources, bln boe e.g. fur
Slide 25: Slide 25
Slide 26: Peter Voser, Financial Strategy
Peter Voser Chief Financial Officer Financial Strategy
Slide 27: Strong cash generation
Strong cash generation 2004 Cash In $34. 9bln 2004 Cash Out $28.4bln $6.5 bln Divestments 7.6 excess cash Other Working capital 1.9 Buyback + option hedging** 4.8 Debt repayment 7.4 Dividends** DACF 26.9 13.4 Capital Investment* * Group Share ** Paid to parent companies
Slide 28: Investing $15 billion to build the business
Investing $15 billion to build the business Capital investment growth (Group share) $ bln EP GP Downstream Other 15 Profitable downstream 10 More upstream 5 0 2004 2005
Slide 29: Raising divestment guidance
Raising divestment guidance $ bln 15 Upgraded range 12 Previous range 10 Q1 Q2 Q3 Q4 2005 2006
Slide 30: Strong and flexible balance sheet
Strong and flexible balance sheet • Gearing target 20-25% – Includes other commitments 25% 4% - 9% 20% flexibility • Year end 2004 position 16% – Gross debt $14.4 bln – Other commitments some $10 bln – Includes surplus cash $6.6 bln Gearing
Slide 31: Priorities for cash
Priorities for cash • Dividend per share increases at least in line with inflation • Maintain strong and flexible balance sheet • Invest in the business • Return surplus cash to shareholders
Slide 32: $13-$15 bln cash to shareholders in 2005
$13-$15 bln cash to shareholders in 2005 DIVIDENDS • 2004: $7.2 billion paid • 2005: $10 billion to be paid* SHARE BUY BACKS • 2005: $3-5 billion *based on current exchange rates
Slide 33: Jeroen van der Veer, The year ahead
Jeroen van der Veer Chief Executive The year ahead
Slide 34: 2004 – a year of extremes
2004 – a year of extremes • Reserves review completed: 12.95 bboe of proved reserves • Record net income • $33 billion cash generation • Powerful Downstream performance • Strong LNG volumes and pricing • Portfolio restructuring gains speed Clear progress
Slide 35: 2005: a stronger Shell
2005: a stronger Shell • Downstream and LNG underpin performance • Investing to regain upstream strength • Divestment target increases • 2005 dividend payout increased: $10+ bln • Buy backs resumed: $3-$5 bln • One company, one culture Moving faster, more decisively